CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 21, June 2, 2016
Inside This Issue:
• Need Some Tips on Digital Marketing? - Participate in Free Webinar on June 9th or 14th
• Sign-Up for June 20 Webinar on “How Digital is Changing Stores in Canada"
• Applications for CHHMA Scholarship Program Due by July 15th
• Beautiful Weather for the CHHMA Ontario Golf Tournament
• Wal-Mart Revives Yellow Smiley Face in U.S. for Low-Price Marketing
• Embrace Digital Technology or Become Irrelevant, Canadian Retailers Told by Sephora CEO
• Loblaw Considering Selling Off Gas-Bar Business
• Canadian Economy Grows 2.4% in Q1 but Slowdown Expected
• After Long Boom, Canada’s Housing Shows Some Signs of Cooling as High Prices Create ‘a Vicious Circle’
• Toronto and Vancouver Suffering ‘Buyer Gridlock’ as even Existing Homeowners Can’t Afford to Move
• Strong Q1 for Canadian Retail Sales
• Latest U.S. Economic News
Association News
Need Some Tips on Digital Marketing? - Participate in Free Webinar on June 9th or 14th
CHHMA members are invited to participate in a free educational webinar on Digital Marketing in June presented by Sofie Andreou of Sofie Andreou & Associates.
Sofie recently spoke at the CHHMA Spring Conference & AGM in April and we have now asked her to continue to work with CHHMA and COPA members through her Digital Marketing Education Series which includes webinars and possibly her Video Tutorials, as an added member benefit.
To accommodate your various schedules, we are offering the introductory webinar (approx. 45 minutes) at a morning and afternoon session: June 9th at 9:00 a.m. or June 14th at 1:30 p.m.
This introductory webinar will focus on the basics and a tip in each of Facebook, Twitter and LinkedIn.
Immediately following the webinar, a survey will be sent to you asking which topic you would like us to expand on in future webinars.
If there is interest from the membership, we will also look to extend access to Sofie's online digital marketing tutorials called "Coffee Break Learning" in the fall. To find out more on Coffee Break Learning or Sofie click here: http://www.sofieandreou.com
For the GoToMeeting sign-in details for the webinar and links to a few of Sofie’s video tutorials which you might find useful, click here.
Sign-Up for June 20 Webinar on “How Digital is Changing Stores in Canada”
On Monday, June 20, CHHMA members will once again have an opportunity to participate in a webinar (at no cost) put on by Michael Rogosa, a senior analyst at RetailNet Group.
Mr. Rogosa previously held a webinar on March 22nd for CHHMA and COPA members that presented some interesting demographic information and consumer trends impacting retail sales in Canada.
This time, the webinar topic will be: How Digital is Changing Stores in Canada.
Canada’s low scale and adoption of ecommerce has been well documented, but many have made the mistake of overlooking the broader impact digital tools and capabilities are having on the retail environment. While Canada has not seen the same movement in products leaving stores as many other developed nations, the shopper’s path to purchase and value chain have changed dramatically.
This session we will look at the impact of digital tools on the path to purchase and show examples of retailer investment in digital integration in the store.
The webinar will start at 2:00 p.m. EDT and last approx. 30 minutes.
To register for the webinar, click here.
Applications for CHHMA Scholarship Program Due by July 15th
The CHHMA is once again pleased to be able to offer the opportunity for children of employees of our member companies to apply for a scholarship to help offset the cost of post-secondary education. The Association recognizes the importance of education and therefore encourages children of our member companies to attend University or College. Successful candidates receive $1,000 CDN per year for the first two years of study leading to a diploma or degree from an accredited community college or university.
The scholarship program is available to the dependents of any current full-time employees of the CHHMA or member companies. The program is only offered to Canadian companies or divisions of companies based in Canada which are members of the CHHMA. The member company must remain a member in good standing in order for the student to qualify for the second year of the scholarship.The student's parent or guardian must be an active full-time employee with at least one year seniority with the CHHMA or member company as of July 15th in the year of application. Applicants must be preparing to enter an accredited community college or university in the fall term, and attain a minimum average of 75% in the last year of high school (or CEGEP).The decision of the Selection Committee and the CHHMA is final and not open to appeals.The CHHMA reserves the right to withdraw a scholarship should the student's parent(s) or guardian(s) voluntarily leave the employment of the CHHMA or member company, or if employment is terminated for just cause prior to the start of the school year, or if the company terminates its membership in the Association.
Complete details, application forms and information sheets (for bulletin board postings) in English and French can be found at http://www.chhma.ca/Public/Scholarship-Program. Please print off and post these notices in your lunch room or high traffic area.
The CHHMA must receive applications from potential candidates no later than July 15th.
Since 2001, the CHHMA has awarded $160,000 towards scholarships and some 80 young people have benefited from the scholarship program.
Beautiful Weather for the CHHMA Ontario Golf Tournament
It was a gorgeous sunny day on Tuesday for the 47th Annual CHHMA Ontario Golf Tournament held at the Angus Glen Golf Club in Markham.
CHHMA members enjoyed the splendid weather on the course with colleagues and invited customers as they put their golfing abilities to the test.Afterwards attendees enjoyed an excellent lunch and some skilled and lucky participants walked away with competition hole and draw prizes.
We would like to acknowledge our key sponsors for the event: Envirogard/Rainfresh, Groupe SEB Canada, Magtar Sales, Philips Lighting, Recochem and Shop-Vac Canada.
A silent auction was also held to raise money for the CHHMA Scholarship Program. We would like to thank all the companies that donated items for the auction (and draws) as well as all the individuals who bid on items.
A full recap of the event will be on the CHHMA website next week under Past Events.
We look forward to doing it again next year!
Industry News
Wal-Mart Revives Yellow Smiley Face in U.S. for Low-Price Marketing
Wal-Mart is reviving its yellow smiley image to be the face of its low-price marketing.
The United States’ largest retailer is emphasizing customer service and aiming to reinforce a price leadership claim that’s been chipped away at by increased competition from online leader Amazon.com and other rivals. The smiley, dormant for ten years, has returned to some digital advertising and will be in TV ads and some store signs starting next week. From there it’s likely to expand.
Wal-Mart announced the move Wednesday at a gathering of about of 2,600 mostly hourly U.S. workers that’s tied to this week’s annual shareholders meeting. The rally featured speeches from top executives about how to serve customers, including the importance of putting on a happy face.
“Put that smile on. People notice that,” said “Family Feud” host Steve Harvey, who played the game with a few executives along with a cashier and driver. Workers also received “smiley” buttons to wear.
Nearly 70% of Wal-Mart’s customers still associate the smiley with saving at the stores, even though it has been largely absent for a decade, Chief Marketing Officer Tony Roger said on Wal-Mart’s blog.
The discounter initially gave out “Smiley” stickers to store shoppers in 1990, and the image later became the face of what the company calls “rollbacks” — discounts for a set period on key items. The face was then incorporated into characters like Zorro and Robin Hood. But it virtually disappeared in 2006 as the company shifted its marketing focus.
It will be the face of Wal-Mart’s low-price marketing again as the company tries to increase sales at its namesake U.S. business. Wal-Mart’s U.S. discount division just reported its seventh straight gain for a key measure as its efforts on basics like cleaning up its stores and increasing customer service are helping business.
Source: The Associated Press
Embrace Digital Technology or Become Irrelevant, Canadian Retailers Told by Sephora CEO
As the chief executive of beauty retailer Sephora Americas, Calvin McDonald is suitably well-seasoned to advocate for change.
The former CEO of Sears Canada Inc. exited abruptly for the San Francisco-based role in 2013 after reported clashes with Sears Canada’s board over the degree and pace of funding for his radical transformation plan at the struggling department store chain.
Now, McDonald believes bricks-and-mortar retailers, particularly in Canada, need to better embrace digital technology to stay relevant in an era when almost everything can be ordered from Amazon.com.
“What we are seeing in the U.S. is a fight for survival — traditional retailers are under siege,” the London, Ont. native told an audience at the Retail Council of Canada’s annual Store 2016 conference in Toronto. “They are having to recreate themselves in order to survive.”
Sephora, owned by French luxury conglomerate LVMH, first opened in Canada in 2004 and now has 60 stores across the country. Its corporate culture became much more focused on change and innovation after failing to win over consumers when Sephora opened in the U.S. 17 years ago, said McDonald, who is in charge of Sephora in North America and Latin America. He suspects Canada’s five-year lag behind the U.S. in e-commerce is also related to our high penetration of foreign retailers relative to domestic ones: 19% of retail sales in Canada are conducted through foreign owned retailers, compared with 3% in the U.S.
Foreign enterprises typically have less empowerment at the local level, and that decentralization of power might dim the urgency of a drive for change, he said. In addition, two-thirds of Canadians order online from U.S. and international websites when they do not have access domestically to the product that they want, McDonald noted.
That’s key for Canadian retailers because even as e-commerce rates in Canada continue to lag that of the U.S., we are expected to catch up. By 2019, an estimated 10% of retail purchases will be made online, according to Forrester Research, up from 6% in 2014, and coming close to the 11% 2019 forecast for the U.S.
Sephora’s business is thriving as it invests more of its resources in mobile technology, the fastest growing area of e-commerce. Mobile technology forges a better emotional connection with consumers than a desktop computer, “because her [phone] is with her constantly,” McDonald said, affording a retailer opportunity to regularly interact with customers and send them loyalty offers, product information, or allow them to book in-store appointments.
In February, the retailer launched a “virtual artist” program through a mobile app that allows users to see a live image of themselves and digitally “try on” one of its 5,000 available shades of lipstick and purchase them.
“In the first four weeks, we had over two million unique visitors,” McDonald said. More importantly, it led to “a ton of add-to-basket, click, and buy,” he said.
The mobile push is driven by consumer demand. A new survey from American Express reported 77% of Canadian retailers say customers are driving them to adopt more mobile technology, with 35% of respondents saying they will create or invest in updating a mobile app in the next year; 45% they will add mobile payment options in the next year.
At the Body Shop Canada, retail vice-president Laine Ferguson says the company has given staff iPhones to interact with customers through social media.
And Marc Metrick, president of luxury retailer Saks, said parent company HBC also has its eye on mobile technology.
“Just based on its maturation, mobile needs a lot more attention right now — it’s not as developed,” he said. “But the fusing together of the online with our bricks and mortar business — that’s what we are focusing a lot of our technology on.”
One example, Metrick said, is a new program currently rolled out to 10 per cent of Saks sales associates which allows them to connect with online consumers in real time during transactions and continue the relationship afterward, sending personal recommendations on merchandise and book in-store appointments for personal shopping.
Source: Article by Hollie Shaw, The Financial Post
Loblaw Considering Selling Off Gas-Bar Business
Loblaw Cos. Ltd. is mulling the sale of its gas station business, bucking the trend of large retailers doubling down at the pumps.
The grocery and pharmacy giant said last Friday that it had started a process to talk to potential buyers about the sale of its 212 gas stations, which have been established alongside 20% of the company’s locations, such as Real Canadian Superstore, No Frills and Independent grocers across most provinces.
Loblaw’s move to siphon off its fuel business would be at odds with competitors who are increasing their focus on their gas bars in Canada and south of the border.
Michael Medline, chief executive officer of Canadian Tire, has said he wants to bolster the company’s gas business because it helps drive customers to the retail and financial services divisions of the company. “We really like this business,” Mr. Medline told analysts last month. “Our plan is to ensconce the petroleum division even stronger into our group of businesses.”
In the U.S., Wal-Mart Stores Inc. plans to build and run more of its own gas stations, according to a report in The Wall Street Journal. The company’s long-time partner operator Murphy USA Inc. will be left to tend the more than 1,000 stores it has partnered with Wal-Mart on so far.
On both sides of the border, Costco Wholesale Corp. has become an aggressive competitor in the gas business, offering discounts that customers will travel further to get and line up for on weekends. These stations typically exceed the industry average litres pumped per year by a wide margin.
Grocers, Canadian Tire and Costco have grown their presence in the retail gas-fuelling business significantly in the past decade, contributing to an overall decline of the number of locations in Canada as smaller competitors are squeezed out. While there were about 21,000 gas stations across the country 25 years ago, now there are about 12,000, said petroleum industry consultant Michael Ervin, who monitors the retail gasoline industry.
Loblaw gas stations are branded under various names that respond to their adjacent stores, such as Gas Bar, At The Pumps and A Plein Gaz. The gas bars have loyalty systems that allow customers to earn rewards through the company’s PC Points cards, as well as a legacy rewards program called Superbucks.
When it comes to buyers, Canadian convenience giant Alimentation Couche-Tard Inc. has been acquisitive in recent months. But Peter Sklar, an analyst at BMO Nesbitt Burns, says he isn’t sure whether the company “would have an interest due to the relatively small square footage of the store footprint versus the average Couche-Tard store.” Other major Canadian gas station owners include 7-Eleven Canada Inc. and Parkland Fuel Corp., which have both been expanding.
Very few oil refining businesses still have retail gas stations integrated into their businesses, with the notable exception of Suncor Energy Inc.’s Petro-Canada brand. In March, Imperial Oil Ltd. struck a $2.8-billion deal to sell 497 Esso-brand retail gas stations to five fuel distributors in a sale process that garnered interest from U.S. buyers as well as Canadian businesses.
Loblaw says that whether it sells the gas stations or not, it intends to keep the loyalty systems and locations intact for customers, which will be a consideration for any potential buyer.
“Customers appreciate the convenience of on-site fuel and the benefits of a loyalty program that links gas bar and grocery purchases. We anticipate that these benefits will continue regardless of whether the business is sold,” Grant Froese, chief operating officer of Loblaw, said in a statement. The company said it had gone public with its proposal to sell the business to generate a “competitive and transparent” bidding process.
The fact that Loblaw wants to cling to this rewards program comes as no surprise to Mr. Ervin, who said the opportunity to “cross-merchandise,” or create incentives at the pump that encourage shopping in the grocery store, has been one of the big strengths of non-traditional gas station operators such as the grocers and Canadian Tire.
But the partnership model hasn’t been foolproof in Canada. In 2002, Wal-Mart attempted to expand its gas station partnership agreement with Murphy into Canada. Murphy built eight gas stations in the country, with plans to grow and aggressively compete on price. But by 2007, Murphy had quietly exited the Canadian market altogether.
The gas business can also be volatile from quarter to quarter. At Canadian Tire, gas sales were down a little in the first quarter because of unseasonable weather and economic weakness in Alberta. But CEO Mr. Medline said he was not too concerned about sales volumes in the long term. “They will remain steady or probably in the long term a tiny bit up, but they don’t move that much.”
Source: Article by Jacqueline Nelson, The Globe and Mail
Economic News
Canadian Economy Grows 2.4% in Q1 but Slowdown Expected
Canada’s economy grew at its fastest pace in more than a year in the first quarter, but a deeper-than-expected slump in March has put the economy on a much weaker footing for what could be an outright contraction in the second quarter.
Statistics Canada reported on Tuesday that real (i.e. inflation-adjusted) GDP grew at an annualized rate of 2.4% from the previous quarter, the fastest since the fourth quarter of 2014, and well ahead of the 0.5% pace in the final quarter of 2015. The 2015 fourth-quarter figure was revised downward from the originally reported 0.8%.
Despite the solid growth, the first-quarter result was well below the 2.8% average estimate of economists, and a far cry from forecasts of more than 3% from just a few weeks ago, testament to the disappointingly weak finish to the quarter. March’s real GDP was down 0.2% month over month, even worse than the 0.1% decline economists had anticipated, marking the second straight month of contraction after a booming start to the year.
“A fine quarter ended with a thud, as Canadian GDP got all its momentum from its first month, a signpost of a slowdown ahead,” said CIBC chief economist Avery Shenfeld in a research note.
The loss of momentum, coupled with the Alberta wildfires, has economists expecting that the economy will stall in the second quarter. The weaker-than-expected first-quarter and March results now have many economists anticipating that the economy will shrink slightly in the current quarter.
“The quarter ran out of steam by March, and the worry is the start-of-year performance may prove a one-trick pony,” said Leslie Preston, senior economist at TD Bank, in a research note. “The disappointing monthly GDP reading in March means that economic momentum was already looking soft heading into the second quarter, and the disruption of oil production in the oil sands due to the Alberta wild fires will worsen what was already looking like a soft quarter.”
The Canadian dollar weakened after the release of Tuesday’s report. Around noon, the loonie was trading at 76.32 cents (U.S.), down from Monday's close of 76.62 cents.
For the first quarter, exports of goods and services led the growth, with a surge of 6.9% annualized. Consumer demand was also solid, with household consumption up a healthy 2.3% annualized.
The economy continued to suffer from slumping business investment, a major theme since the oil shock hit in late 2014. Business gross fixed capital formation – which reflects corporate spending on structures, machinery and equipment – fell 1.5% annualized, the fifth straight quarter-to-quarter decline, although it was the smallest drop over that time. But excluding residential construction, which remained strong (up 11.2%) amid a healthy housing market, business investment was down 9.3% annualized. Business investment has now declined by more than 17% from its 2014 peak.
Economists also noted that businesses continued to whittle down their inventories, perhaps reflecting the unsteady growth in the U.S. and other export markets during the quarter. Inventory draw-downs subtracted about 0.3 percentage points from the annualized growth rate in the quarter.
On an industry basis, the first-quarter growth was led by retail sales, up 6.4% annualized from the previous quarter.
Manufacturing was up 2% annualized, while the oil and gas and mining segment also grew 2%. The financial and real estate segments both grew at a 3.2% pace. Construction fell 1.6%.
Government spending rose a softer than expected 0.9%.
In March, the big drag on growth was from the beleaguered energy sector, which slumped 1.5% month over month. A sharp drop in drilling activity sent oil and gas support services down 14% in the month, while oil and gas extraction fell 0.8%.
The manufacturing sector dipped 0.2% in March, adding to its 0.9% slowdown in February. And retail sales fell 1.3%, reversing course after two straight months of gains.
Overall, output from goods-producing industries slumped 0.8% in March, their worst performance in six months. Services-producing industries were flat for the second straight month.
“Today’s GDP report is further evidence of the Bank of Canada’s message that the adjustment to lower oil prices has been uneven,” Ms. Preston said. “The underlying fragility of Canada’s economy beneath this see-saw growth pattern will necessitate monetary policy to remain stimulative for quite some time. We don’t expect the Bank of Canada to raise interest rates until 2018 at the earliest.”
The economy is expected to bounce back in the third quarter, as oilsands production comes back on stream and a massive rebuilding effort gets underway in the nearby town of Fort McMurray.
“Our expectation is that sustained strength in exports and consumer spending will more than offset the weakness in energy-related business investment in the second half of the year and throughout 2017,” RBC assistant chief economist Paul Ferley wrote in a research note.
Source: Statistics Canada, The Globe and Mail, The Toronto Star
After Long Boom, Canada’s Housing Shows Some Signs of Cooling as High Prices Create ‘a Vicious Circle’
Seven years into a Canadian housing boom that many have warned will end in a bust, there are signs of a sales slowdown in the two hottest cities, with some economists and real estate agents saying the peak has passed.
A cooling of sales activity in Toronto and Vancouver, the two tent poles holding up an otherwise soggy national housing market, could bring the two markets into line with the rest of the country’s tepid economy.
It would be welcome news to homebuyers who have struggled to win bidding wars in the two cities, which represent about 54% of the Canadian housing market. Even some real estate agents welcome the idea of a calmer market.
“A few months ago the dogs — the less desirable units that a year ago nobody was bidding on — they were going with multiple offers … that’s definitely slowed,” said Pete Shpak, a Vancouver agent.
“I have seen a couple (homes) lately, though, that I thought would go into multiple offers, but didn’t,” he added.
Prices are still up dramatically over the past five years in both cities, rising 41% in Vancouver and 45% in Toronto, according to the Canadian Real Estate Association (CREA).
But seasonally adjusted residential sales in Toronto fell by 1.8% in March from February and were flat in April, while Vancouver sales slipped 0.3% in March and 1.0% in April. Activity was still well up from a year ago.
“There are reasons to believe maybe we’ve hit the peak in those two markets,” Gregory Klump, chief economist for CREA, said on Friday. “But I expect them to remain strong.”
Some economists said U.S. interest rate hikes expected later this year could drive up Canadian bond yields and mortgage rates, helping cool sales.
Desjardins senior economist Benoit Durocher sees a lack of affordability ending the boom in Toronto and Vancouver, where prices have far outstripped income gains.
“Since prices are so high, you have fewer buyers in the market and fewer transactions. I think it is the first step before an adjustment in the price,” said Durocher, who expects national prices to drop 3% in 2017.
Klump and others also blame limited new listings for stalling monthly sales growth, as some homeowners who would like to cash in fear an inability to move up.
“It’s a vicious circle. As people consider selling, it might be very difficult to find a home to meet their needs. We haven’t seen as many listings as you would expect based on price growth,” said Jason Mercer, director of market analysis at the Toronto Real Estate Board.
Source: Reuters
Toronto and Vancouver Suffering ‘Buyer Gridlock’ as even Existing Homeowners Can’t Afford to Move
Skyrocketing housing prices in Toronto and Vancouver are now preventing even existing homeowners from being able to upgrade into a new home.
While much has been made of the plight of first-time homebuyers who have to contend with lack of affordability in both markets, TD Economics notes that higher prices are now locking out those who bought entry-level homes years ago and are hoping to upgrade.
This has further worsened the supply of entry-level homes in both markets, exacerbating what TD calls “buyers gridlock.”
“Our definition of buyer gridlock refers to an existing homeowner, who is trying to trade up from an entry level home, but also faces a constrained supply of affordable options,” said Beata Caranci, chief economist at TD Bank Group. “The purchase of an entry-level home was done with the intention of ‘trading up’ as your life- style changed with children, job or income.”
Caranci compared the current situation to a Monopoly board, where players usually begin by buying up the cheaper properties near the start, while also still having money left over to buy the mid-tier properties, before swooping in later in the game to buy the most expensive spots at the end of the board.
Unfortunately, if Monopoly were like the current Canadian housing market, the cheap properties would fetch mid-tier prices and buyers would be left with no money to buy other properties.
“The widening price gap between an entry-level home and a trade-up home becomes a ‘barrier to entry’,” said Caranci. “In turn, this reduces churn in the market, elevating prices and scaling back the selection of choices.”
She also pours cold water on the argument that both cities are sellers’ markets. While the sales-to-listings ratio shows that homes are readily bought up in Toronto and Vancouver, price appreciation for entry-level homes have lagged the gains for trade-up homes, worsening the gridlock.
This is readily seen in the condo market, where entry-level buyers have increasingly found themselves. Price gains for condos have consistently lagged appreciation for detached homes by a wide margin in recent years.
“On average, it costs two times more to purchase a detached home compared to a condo in the Greater Toronto Area market,” she said. “In the Greater Vancouver Area, that price gap has widened to three times the level.”
Most worrying, when looking at incomes-to-prices, Caranci notes that ratios in both cities are beginning to mirror those seen during the peak years of the U.S housing boom.
The gridlock is further creating another problem. Those buyers with entry-level detached homes locked out of upgrading are opting to put money into renovations instead. Sometimes, those upgrades are enough to take the house out of the entry-level market, worsening supply further.
All of that has two effects. First, new buyers are increasingly being forced to choose only condos. Second, markets far beyond Toronto and Vancouver are seeing their own prices rapidly inflate as buyers leave the two cities and head outwards for more affordable options.
Caranci said that even a housing market crash might not be enough narrow the price gap between a detached house and a condo.
“In fact, it could worsen within the core metro areas where existing condo supply and comparative opportunities for development are more readily available,” she said.
Finally, there are the economic stability risks that all of this has created. At no time in history have Canadians ever been so indebted and had so much of their wealth tied into their homes.
“This too eats into future savings for retirement and carries risk for the broader economy that the next economic down cycle will be more extended than previous ones,” said Caranci.
Source: Article by John Shmuel, The Financial Post
Strong Q1 for Canadian Retail Sales
Total Canadian retail sales were up a solid 5.5% on a not seasonally adjusted basis in Q1 2016 versus a year ago, according to the latest Statistics Canada numbers. It was the strongest Q1 (or any other calendar quarter, for that matter) in 6 years. The 3 month growth trend has spiked upward, and the underlying 12 month trend is improving.
Easter was in March this year, versus April in 2015, and February had an extra day due to 2016 being a leap year. But this is not enough to explain the jump. Gains were also broadly based, with above average retail sales growth at drug stores, shoe stores, home improvement retailers, and new car dealers.
The main push for Q1 actually occurred in February, which had an unusually high year-over-year sales growth of 7.5% (revised upward from initial reports). Things came back down to earth somewhat in March, with retail sales gaining a decent but more modest 4.7% versus a year ago.
Looking ahead, it's difficult to foresee that these levels of retail sales growth can be sustained. The Canadian economy just isn't up to it.
Store Retail
Store Retail consists of food plus drugs plus merchandise stores, and excludes the volatile automotive & related sector.
Data shows an upward spike for the 3 months ending March (a 5 year high in fact), and a modest improvement in the underlying 12 month trend. It may not last, but it's a great way to start the year.
Food & Drug
Retail sales growth in the Food & Drug sector improved in Q1, although not as dramatically as for some other retailers.
Health & personal care stores led the way in Q1 with retail sales up 8.2%. This was exceptional and the highest 3 month gain in almost 8 years. Beer, wine & liquor stores also had a strong Q1 with retail sales up 7.6% versus a year ago.
Supermarkets & other grocery stores however are still the laggards in this sector. Retail sales were up just 1.2% in Q1, which is mostly just inflation.
Store Merchandise
The Store Merchandise sector was up 6.4% year-over-year in retail sales for Q1 2016. This was the strongest Q1 gain in 6 years, and compares to a 3.9% annual gain for all of 2015.
Many retailer types had high sales gains in Q1, including shoe stores (up 13.4% year-over-year), building material & garden equipment/supplies dealers (+10.7%), and clothing stores (+8.8%). Almost all other retailers in the sector had at least somewhat above average Q1 sales increases, with the major exception of electronics & appliance stores at down 3.8%.
Automotive & Related
Automobile dealers' sales continue to perform at a high level, up 15.0% in Q1 2016 year-over-year, almost 3 times higher than the rest of Canadian retail. This has the effect of pulling up the overall growth rate, as auto dealers represent about 22% of total Canadian retail.
On the other hand, this is being offset at gasoline stations, where sales were down 9.4% for the quarter. This sales decline is actually an improvement – in Q1 last year, their sales were down almost 20%.
To see the full article, click here.
Source: Ed Strapagiel, Consultant
Latest U.S. Economic News
U.S. Economic Growth Revised Higher in First Quarter; Profits Rebound
U.S. economic growth slowed in the first quarter although not as sharply as initially thought, as a surge in home building and steady inventory accumulation partially offset the impact of modest consumer spending and soft business investment.
U.S. GDP rose at a 0.8% annual rate as opposed to the 0.5% pace reported last month, the Commerce Department reported last Friday in its second GDP estimate for the January-March period.
That was the weakest growth since the first quarter of 2015.
The upward revision reflected a smaller drag from trade than previously estimated. The government also reported a rebound in after-tax corporate profits, which increased at a 0.6% rate in the first quarter after plunging at an 8.4% pace in the fourth quarter.
Income growth for the first quarter also was revised higher. As a result, the U.S. economy grew at a much faster 2.2% rate when measured from the income side, after expanding at a 1.9% pace in the fourth quarter.
The economy has been hurt by a strong dollar and sluggish global demand, which have eroded export growth. It has also been squeezed by lower oil prices, which have undercut profits of oilfield companies like Schlumberger and Halliburton, forcing them to slash spending on equipment.
Economists also believe the model used by the government to strip out seasonal patterns from data is not fully accomplishing its goal despite steps last year to address the problem.
Residual seasonality has plagued first-quarter GDP data, with growth underperforming in five of the last six years since the beginning of the economic recovery in 2009.
There are signs the U.S. economy regained momentum early in the second quarter, with retail sales, goods exports, industrial production, housing starts and home sales surging in April.
The Atlanta Federal Reserve is currently estimating second-quarter GDP rising at a 2.9% rate. But the ongoing high level of inventories poses a downside risk to that forecast.
Economists polled by Reuters had expected first-quarter GDP growth would be revised up to a 0.9 rate. The U.S. economy grew at a 1.4% rate in the fourth quarter.
Spending on residential construction increased at a 17.1% rate in the first quarter, the fastest pace since the fourth quarter of 2012. It was previously reported to have increased at a rate of 14.8%.
Residential construction added 0.56 percentage point to first-quarter GDP growth, up from the 0.49 percentage point reported last month.
Businesses accumulated $69.6-billion worth of inventory, instead of the $60.9-billion estimated last month. Inventories cut two-tenths of a percentage point from GDP growth instead of the previously reported 0.33 percentage point.
There was no revision to consumer spending, which accounts for more than two-thirds of U.S. economic activity. Spending increased at a pace of 1.9%, a slowdown from the fourth quarter’s 2.4% rate. Households were frugal in the first quarter, cutting back on purchases of long-lasting manufactured goods like automobiles. Income at the disposal of households after accounting for taxes and inflation was revised up to show it surging at a 4.0% rate in the first quarter instead of the previously reported 2.9%. Savings were revised up to $782.6-billion from $712.3-billion.
Exports were not as weak as initially thought. That, together with a decline in imports, produced a smaller trade deficit, which subtracted 0.21 percentage point from first-quarter GDP growth instead of the 0.34 percentage point reported last month.
A sustained plunge in energy sector investment undercut business spending. Equipment spending tumbled at a steeper 9.0% rate, the fastest pace of decline since the second quarter of 2009. It was previously reported to have dropped at a 8.6% rate.
Spending on equipment will likely remain weak in the second quarter, with a report showing orders for manufactured capital goods excluding aircraft and defence declined in April for a third straight month.
Investment in non-residential structures dropped at an 8.9% pace in the first quarter instead of the previously reported 10.7% rate.
Source: Reuters
U.S. Consumer Sentiment Jumps to Highest in Nearly a Year
Americans turned more optimistic about the economy in May than the previous month, buoyed by steady hiring and higher incomes.
The University of Michigan said last Friday that its index of consumer sentiment rose to 94.7 in May, the highest in nearly a year. That’s up from 89 in April.
The increase could drive greater economic growth, as a more optimistic consumer is typically more likely to spend. Consumer spending accounts for roughly 70% of U.S. economic activity. The U.S. economy slowed to a crawl in the first three months of this year, growing just 0.8% at an annual rate. Yet most analysts expect growth to rebound in the April-June quarter.
Richard Curtin, chief economist for the survey, said the sentiment index has been higher than last month’s reading only four times in the last 110 surveys.
Americans are also feeling better about their finances. More consumers cited income gains than at any time since late 2000, Curtin said, and fewer people complained about price increases than at any time since 2003. That means inflation is less of a concern.
Still, the survey detected some notes of caution, stemming from the presidential election. The economic policies of the next president were cited by consumers as their biggest uncertainty.
“This will temper consumer spending by acting to maintain a higher level of precautionary savings,” Curtin said.
The survey also included some positive news for the housing market: More Americans are confident that they can sell their homes at healthy prices.
That suggests one factor that has held back housing could be fading. Even as home prices have risen for several years, many homeowners still owed more on their mortgages than their homes were worth, making it difficult to sell. Others had so little equity that selling would have left them little or no down payment for a new home.
Those trends have limited the number of homes available for sale, which in turn has pushed up prices and made many homes unaffordable to would-be purchasers, particularly younger first-time buyers.
Yet now, more Americans expect they can sell their homes for prices that will be high enough to avoid losses, Curtin says. That could result in more homes being listed for sale and provide an additional boost to the housing market during the spring and summer buying season.
Source: The Associated Press
U.S. Fed’s Janet Yellen Says Rate Hike Likely Appropriate in Coming Months
The Federal Reserve should raise interest rates “in the coming months” if the economy picks up as expected and jobs continue to be generated, U.S. central bank chief Janet Yellen said last Friday, bolstering the case for a rate increase in June or July.
“It’s appropriate … for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate,” Yellen said during an appearance at Harvard University.
Although Yellen expressed caution about too steep a rise in U.S. interest rates, she sounded more confident than she has in the past about economic growth and the prospect of inflation edging higher toward the Fed’s 2% target.
“The economy is continuing to improve … growth looks to be picking up,” Yellen told a group of professors and alumni at the Ivy League college in Cambridge, Massachusetts. She added that she expects the labour market to continue to improve.
Prices for U.S. Treasuries fell after Yellen’s remarks, while stocks rose. The U.S. dollar was trading higher against a basket of currencies.
The probability of a rate hike at the Federal Open Market Committee’s June 14-15 meeting rose to 34% from 30% before Yellen’s remarks, according to CME Group, where the futures contracts are traded.
Bets on a rate increase at the July 26-27 policy meeting hit 60%, more than double the estimate from a month ago.
The Fed raised its key benchmark interest rate in December for the first time in nearly a decade, but has held off since then due to concerns earlier this year about a global economic slowdown and financial market volatility.
Those concerns have subsided somewhat in recent months. In recent weeks, several Fed policymakers have reacted to stronger U.S. economic data and stable financial markets by putting a rate hike squarely on the table for either June or July.
Yellen’s comment last Friday “reinforces the signals on early rate hikes communicated recently by her FOMC colleagues,” Mohamed A. El-Erian, chief economic adviser at Allianz, said.
Weak oil prices and a strong dollar have been blamed for helping to keep U.S. inflation below the central bank’s target.
Last Friday, Yellen said those factors “seem like they are roughly stabilizing at this point and my own expectation is that … inflation will move back up over the next couple of years to our 2% objective.”
The U.S. economy has not seen “much improvement in wage growth which is suggestive of some slack in the labour market,” Yellen added.
Source: Reuters
U.S. Pending Home Sales Jump to Highest Level Since Early 2006
Contracts to buy previously owned U.S. homes surged far more than expected in April to the highest level in more than a decade, another sign the economy has gained steam during the second quarter.
The National Association of Realtors (NAR) said last Thursday its pending home sales index, based on contracts signed last month, increased 5.1% to 116.3, a level not seen since February 2006.
Economists polled by Reuters had forecast pending home sales rising 0.6% last month. Contracts usually become sales after a month or two.
The increase in pending home sales for March also was revised marginally upward. Overall pending home sales last month were up 4.6% from a year ago.
The U.S. housing sector has steadily strengthened on the back of an economy near full employment and historically low mortgage rates.
Contracts rose in three of the nation's four regions, with the West reporting an 11.4% jump and the South showing a 6.8% increase.
The Midwest reported a 0.6% decline, but pending home sales in that region were still up 2.0% from a year ago.
Source: Reuters
Upcoming CHHMA Events
Digital Marketing Webinar – Sofie Andreou Presenter
Thursday, June 9, 2016, 9:00 a.m. – 9:45 a.m. or
Tuesday, June 14, 2016, 1:30 p.m. – 2:15 p.m.
How Digital is Changing Stores in Canada Webinar - Michael Rogosa Presenter
Monday, June 20, 2016, 2:00 p.m. – 2:30 p.m.
|
CHHMA Industry Calendar
To register for all events visit our website at www.chhma.ca or call Pam Winter at (416) 282-0022 ext.21.
CHHMA Links
Freight Logistics Savings
No Obligation Consultation
Discount Cellular
Phone Rates
Long Distance &
Telecommunications Savings
Discount Gas & Diesel Rates
Logo Apparel &
Promotional Products
Office Product Discounts
"Eye On Our Industry" is published by the CHHMA as an information resource for our members. Member input regarding content and format is welcomed. Please contact Michael Jorgenson by email: mjorgenson@chhma.ca, or call at (416) 282-0022, ext. 34. CHHMA is located at 1335 Morningside Ave., Suite 101, Scarborough, ON, M1B 5M4 www.chhma.ca
If you would no longer like to receive our newsletter, please click here: Unsubscribe